Action must be taken on house prices in London

AndyGuil

chewmylegoff wrote: »

It's because people are falling over each other to play the man not the ball. For instance the OP says nothing about help to buy, but the whole thread seems to be about help to buy because the OP has talked about it before. I wonder whether anyone has anything to say about what is happening in London.

Personally as a person trying to buy a house about a mile outside "London" I find the market bizarre and worrying and I cannot work out what is driving it and supporting it. I worry about who will actually be physically able to buy a house from me in 5 years' time when I want to sell it because I'm not really sure how anyone who hasn't been pretty lucky can even afford to buy now let alone in 5-10 years' time.

I don't believe there is a lot of help to buy in London. However I am fairly certain the market is driven simply by lack of supply. This is why 10, 20, ...etc. people turn up to a viewing. The desirability of living in London is very high and the closer you can get the more desirable. With so many people after such a tiny house stock then it is inevitable that prices are going to rise. It has been like this for a long time, a few decades.

HAMISH_MCTAVISH

chewmylegoff wrote: »

I wonder whether anyone has anything to say about what is happening in London.

Prices are rising.

Exactly as you'd expect given the extraordinary shortage of housing.

And despite lending continuing to be extremely restricted compared to more normal times, albeit, somewhat less restricted than it has been in more recent times.

Personally as a person trying to buy a house about a mile outside "London" I find the market bizarre and worrying and I cannot work out what is driving it and supporting it.

What is driving it is 5 years of pent up demand combined with 5 years of record low house building.

The end result of which was never going to be anything other than strongly rising prices.

The only sustainable way to reduce prices is to build more houses.

Restricting lending only kicks the can down the road, drives up rents, reduces building, and causes a bigger boom in the future.

As we're seeing now.

I worry about who will actually be physically able to buy a house from me in 5 years' time when I want to sell it because I'm not really sure how anyone who hasn't been pretty lucky can even afford to buy now let alone in 5-10 years' time.

Price rises will slow once the necessary adjustment has taken place, and supply and demand have equalised. Whether through an increased supply response to price, or through sufficient numbers of people being priced out.

That could be a long time coming though....

Jason74

HAMISH_MCTAVISH wrote: »

I think it's probably sensible to reduce HTB2 from 600K down to around 400K.

Not that I think it'll make the slightest bit of difference to London prices, as I doubt there is much if any lending going on at the highest brackets of the scheme, but because it might just shut up those who wrongly think HTB is fuelling a London bubble.

And by doing it that way it'll leave the scheme to continue helping people who actually need it.

The people who "wrongly think HTB is fuelling a London bubble" include a number selling agents in some parts of outer London, who have told me personally that HTB is a huge factor behind the increase in demand. In prime central London I would agree that HTB is of little significane, but in the suburban areas where prices have gone up 10% in the last three Months or so, HTB most definitely is a major factor. Indeed, probably the major factor. And as I say, that's coming from agents dealing with transactions at the coalface.

Ideally, HTB2 should be stopped altogether within all London Boroughs. It was only ever going to be counter productive in the capital, and so it's proving (I'm still of the view it's counterproductive everywhere, but that's another debate). If that is politically impossible, then the limit should be reduced nationwide to a level where where the scheme effectively becomes an irrelevance within London.

At £400k, there would still be significant HTB demand in London, and therefore the limit is too high. At £250k (or better still, a little lower than that), you would more or less kill off HTB demand in London (which is essential imho), while having little difference to the ability of FTB elsewhere to access the scheme if that is really what is desired.

MFW_ASAP

HAMISH_MCTAVISH wrote: »

I think it's probably sensible to reduce HTB2 from 600K down to around 400K.

Not that I think it'll make the slightest bit of difference to London prices, as I doubt there is much if any lending going on at the highest brackets of the scheme, but because it might just shut up those who wrongly think HTB is fuelling a London bubble.

And by doing it that way it'll leave the scheme to continue helping people who actually need it.

I thought the consensus was that the London boom was being fuelled by foreign investors, who I presume are not allowed access to HTB2? If the consensus is true then why shouldn't we be helping British citizens to buy a house in their own city? I would have though GD and the usual suspects would be all for this?

wotsthat

HAMISH_MCTAVISH wrote: »

Not that I think it'll make the slightest bit of difference to London prices, as I doubt there is much if any lending going on at the highest brackets of the scheme, but because it might just shut up those who wrongly think HTB is fuelling a London bubble.

Policy shouldn't be about giving people scraps to shut up. They'll just move onto the next media manufactured 'issue'. Policymakers should be persuading people that their actions are correct rather than watering stuff down to reduce the shrillness.

Graham_Devon

Jason74 wrote: »

The people who "wrongly think HTB is fuelling a London bubble" include a number selling agents in some parts of outer London, who have told me personally that HTB is a huge factor behind the increase in demand. In prime central London I would agree that HTB is of little significane, but in the suburban areas where prices have gone up 10% in the last three Months or so, HTB most definitely is a major factor. Indeed, probably the major factor. And as I say, that's coming from agents dealing with transactions at the coalface.

It comes from surveyors, such as RICS too.

It's a very serious concern for many people and many organisations. It's just watered down on here to almost an irrelevance. Not really sure why, as it's clear as day it's a big issue at the moment.

HTB, up to December, represented 6% of total sales in London since HTB started.

Which doesn't sound like much, granted. But that's only HTB1. It doesn't include HTB2. When including those HTB2 sales (and looking forward as this hasn't rolled out fully yet) you could find 10-20% of all London sales are linked to HTB, which does start to become a far more relevant statistic.

I don't personally feel we can therefore suggest that these numbers aren't making any difference in London.

One poster suggested a "few tens of flats" being bought up by foreign investors won't make a difference either. Now, heres the reality... 75% of newly built properties in London were bought by foreign investors last year. 49% of the properties worth £1m+ were bought by foreign investors in the same period. (Research by Savils and Frank Knight).
http://my.knightfrank.co.uk/research-reports/international-buyers-in-london.aspx

Hardly "a few tens of flats". It's just very difficult to steer through all the watering down to get to the reality and discuss those realities at the moment.

Look at all of these things, tweak the policies. Apparently London is the city with the lowest tax rates for foreign investors in property in the world.....

cells

Cornucopia wrote: »

What is it that they/you are proposing should be done.

The only obvious thing is to vary base rates, but that would have unwanted effects elsewhere.

The UK should build at the same per capita rate as France which would mean about 400,000 units a year instead of the current ~130,000 a year

That will slow prices increasing and allow the occupancy rate to slowly fall.

cells

HAMISH_MCTAVISH wrote: »

Prices are rising.

Exactly as you'd expect given the extraordinary shortage of housing.

And despite lending continuing to be extremely restricted compared to more normal times, albeit, somewhat less restricted than it has been in more recent times.



What is driving it is 5 years of pent up demand combined with 5 years of record low house building.

The end result of which was never going to be anything other than strongly rising prices.

The only sustainable way to reduce prices is to build more houses.

Restricting lending only kicks the can down the road, drives up rents, reduces building, and causes a bigger boom in the future.

As we're seeing now.



Price rises will slow once the necessary adjustment has taken place, and supply and demand have equalised. Whether through an increased supply response to price, or through sufficient numbers of people being priced out.

That could be a long time coming though....

Prices could more than double maybe triple in real terms the only result will be a huge transfer of wealth from those 35% of households who do not own to the 1% of households who own about 18% of the housing stock as investments.

I doubt the planning reforms will happen to allow the UK to build at french levels of 400,000 a year. If they don't and prices go up 3x in real terms (and more in nominal terms) its anyone guess how it will blow up

chewmylegoff

HAMISH_MCTAVISH wrote: »

Prices are rising.

Exactly as you'd expect given the extraordinary shortage of housing.

And despite lending continuing to be extremely restricted compared to more normal times, albeit, somewhat less restricted than it has been in more recent times.



What is driving it is 5 years of pent up demand combined with 5 years of record low house building.

The end result of which was never going to be anything other than strongly rising prices.

The only sustainable way to reduce prices is to build more houses.

Restricting lending only kicks the can down the road, drives up rents, reduces building, and causes a bigger boom in the future.

As we're seeing now.



Price rises will slow once the necessary adjustment has taken place, and supply and demand have equalised. Whether through an increased supply response to price, or through sufficient numbers of people being priced out.

That could be a long time coming though....

I understand how supply and demand work to set prices, I just don't understand where the demand (and by that I mean people in a position to buy who want to buy not just people who want a home) actually comes from. I can't fathom how there are actually enough people who (a) can afford to pay £700k for a small 2 bed flat converted flat in clapham and (b) are actually willing to part with that much money for a small 2 bed flat in Clapham for prices to actually stay at that sort of level. Not only does this demand appear to exist but it means that 20 people will come and view the small 2 bed flat on the first morning you do viewings and then offer over the asking price.

I don't know anyone who has bought a house in London recently as a first time buyer without substantial help from their parents or other windfall like inheritance and even then they are often stretched. Given that my social circle consists almost entirely of accountants, lawyers and bankers in their mid-30s it is difficult for me to work out how there seems to be an almost unlimited supply of people in a position to buy enormously expensive crappy little flats in average areas.

cells

chewmylegoff wrote: »

I understand how supply and demand work to set prices, I just don't understand where the demand (and by that I mean people in a position to buy who want to buy not just people who want a home) actually comes from. I can't fathom how there are actually enough people who (a) can afford to pay £700k for a small 2 bed flat converted flat in clapham and (b) are actually willing to part with that much money for a small 2 bed flat in Clapham for prices to actually stay at that sort of level. Not only does this demand appear to exist but it means that 20 people will come and view the small 2 bed flat on the first morning you do viewings and then offer over the asking price.

I don't know anyone who has bought a house in London recently as a first time buyer without substantial help from their parents or other windfall like inheritance and even then they are often stretched. Given that my social circle consists almost entirely of accountants, lawyers and bankers in their mid-30s it is difficult for me to work out how there seems to be an almost unlimited supply of people in a position to buy enormously expensive crappy little flats in average areas.

about 8% or so of the kids of this country go to private schools, ie their parents are rich enough to spend £30k+ per year per child on schooling alone. That is £400k PER KID for their school years. If you have 3 kids that means £1.2 million for education

If a family can afford £1.2 million to send their kids to a private school they can sure as hell afford more than £1.2 million to buy a house!

So yes I am in agreement with you, I dont know many people who could buy a £1m house but they are out there and represent about 10% of the population